Washington University endowment grows by $400M

Helped by an increase in gifts and rebounding financial markets, Washington University grew its endowment by $392 million last year, an increase of 9.6 percent.

Nationally, Washington U. ranks 17th overall, with an endowment worth $4.47 billion as of June 30, 2010, according to NACUBO-Commonfund Study of Endowments, a survey of 850 institutions conducted by the National Association of College and University Business Officers and the Commonfund Institute.

The largest endowment belongs to Harvard University — $27.6 billion. Northwestern University in Evansville, Ill., has the nation’s ninth-largest endowment and the biggest in Illinois, ringing in at $5.95 billion. Among other area schools, the University of Missouri System ranked No. 65 with an endowment of $975 million, and Saint Louis University ranked No. 88 with $708 million.

Contributions from reserves, ramped-up fundraising efforts and improving financial markets drove double-digit increases in endowments for nearly all Missouri and Illinois schools. It’s a far cry from the prior year, when the recession drove endowments down by as much as 30 percent. Washington U.’s endowment is still about 20 percent off its June 2007 high of $5.6 billion. Construction, which Washington U. delayed after its endowment took a hit, has been resumed but at a slower pace, according to spokeswoman Jessica Daues. And effective July 1, 2010, the university’s board of trustees restored voluntary pay cuts Chancellor Mark Wrighton took Jan. 1, 2009, and July 1, 2009, each of 5 percent from his base salary.

Nationwide, university endowments returned an average of 11.9 percent for the 2010 fiscal year, according to the study.

Returns were positive for all major asset classes except real estate, a marked improvement over the previous year, the study found. The increases are for the year ended June 30, 2010, so values don’t reflect the recent run up in the stock market.

Washington University added to its endowment using reserve funds, and saw an increase in gifts to the endowment in the last year, said Kim Walker, chief investment officer. The endowment returned about 12.7 percent last year, but withdrawals for operating expenses reduced the fund’s total growth to 9.6 percent, she said.

“Just as the market drove (the value) down, it also drove the increase in the past year,” she said.

Among the endowment gifts received by Washington University last year include: $48 million of a $60 million gift from John McDonnell and the JSM Charitable Trust; $3 million from The William T. Kemper Foundation; and in January 2010, developer Alvin Siteman pledged to fund an endowment that will provide at least $1 million a year for research on cancer at the Siteman Cancer Center at Washington University.

Saint Louis University’s endowment received the benefit of $1.5 million of a $5 million gift from Alberici Corp. last April.

In December, Bruce and Jane Robert gave $1 million Webster University and $500,000 to SLU’s School of Law to endow chairs.

Endowments’ three-, five- and 10-year returns remained below the levels necessary to support long-term goals, according to NACUBO. But still, the increases signal a welcome turnaround for the country’s higher-education community, said NACUBO President and Chief Executive John Walda.

For the purposes of the study, the percentage change in an endowment’s market value reflects the impact of withdrawals to fund operations and capital expenses; payment of management and investment fees; additions from gifts; and investment gains or losses.

In Missouri, the largest increase was a hefty 30.8 percent jump at Columbia College in Columbia, Mo. Illinois’ biggest jump came from an unrelated institution of the same name — Columbia College Chicago, a private, not-for-profit arts and media school that saw its endowment rise 30.5 percent.

While those percentages are big, it’s all relative — they represent increases of a few million dollars, much smaller than the net growth at larger institutions. The surge at the nonprofit Columbia College in Missouri amounted to an increase of $13.8 million.

Compared to other institutions, Columbia College’s endowment has been tiny, noted Bruce Boyer, its chief financial officer. In an effort to grow the endowment, the college’s board of directors has contributed millions of dollars of the institution’s own money, he said.

“Your endowment will grow based on fundraising efforts and also based on your investment earnings, and in our case it grows because of the money we put back into it,” he said.

In 2010, the college contributed $10.1 million of its own funds, and received about $990,000 in gifts to the endowment. The endowment also earned about $3 million.

When Boyer started work there in 1999, the endowment was worth $5 million; at the end of January 2011, it was worth more than $71 million, he said.

“That’s huge growth. That’s still smaller than the average endowment across the country, but that notwithstanding, it’s definitely headed in the direction we want to see it go,” he said.

Along with adding their own earned cash, other institutions have enjoyed growth from an infusion of gifts, including Lindenwood University in St. Charles. Through January, the university has seen an increase of almost 50 percent in endowed scholarships this fiscal year, said Lucy Morros, vice president for institutional advancement. Much of that increase has come from alumni, whose participation rate is 13 percent, she said.

At Maryville University, the endowment’s 10.3 percent increase reported in the NACUBO-Commonfund study reflects changes in the economy as well as the institution’s own re-investment strategies, said Larry Hays, Maryville’s CFO. During the height of the economic collapse in 2007-2008, some endowments lost 30 percent or more of their value, he noted. The increase over the past year reflects the economy’s slow climb out of the recession.

“It depends very heavily on how each university will have its assets allocated and what sectors they’re investing in,” he said. “Probably most endowments are still not back to where they were when they were at their peak when the market went south. Ours is more than 80 percent back to where it was at its peak.”

Growth over the past year reflects cautious spending practices as much as careful investing, Hays said. Maryville limited its endowment spending to 2 percent of its budget, while other institutions rely more heavily on endowment funds to cover operational costs.

“Instead of taking it out of the endowment, we’ve left it in there, so there is more there to participate in the rebound,” he said.

The study also reported in the St. Louis metro area, Saint Louis University’s endowment rose 9.7 percent, from $645.8 million to $708.3 million; St. Louis College of Pharmacy’s endowment rose 17.1 percent, from $76.9 million to just over $90 million; and Webster University saw a 26.5 percent increase, from $49.9 million to $61.9 million. In Illinois, the Southern Illinois University Foundation at Carbondale experienced a 17.5 percent increase, from $64.9 million to $76.2 million. SIU-Edwardsville’s endowment rose 12.8 percent, from $11.9 million to $13.4 million.

Many institutions declined to discuss their endowments’ performance in the months since the survey concluded. But the recent upswing in the financial markets likely means there’s even better news ahead next year.

“The market has been kind to us and we’ve participated in that, so we’ve had strong returns,” Washington U.’s Walker said. “It’s hard to forecast what’s going to happen in the market going forward.”